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Analysis of supply contracts with quantity flexibility
Lian,Zhaotong1; Deshmukh,Abhijit2
2009-07-16
Source PublicationEuropean Journal of Operational Research
ISSN0377-2217
Volume196Issue:2Pages:526-533
Abstract

This paper explores a class of supply contracts under which a buyer receives discounts for committing to purchases in advance. The further in advance the commitment is made, the larger the discount. As time rolls forward, the buyer can increase the order quantities for future periods of the rolling horizon based on updated demand forecast information and inventory status. However, the buyer pays a higher per-unit cost for the incremental units. Such contracts are used by automobile and contract manufacturers, and are quite common in fuel oil and natural gas delivery markets. We develop a finite-horizon dynamic programming model to characterize the structure of the optimal replenishment strategy for the buyer. We present heuristic approaches to calculate the order volume in each period of the rolling horizon. Finally, we numerically evaluate the heuristic approaches and draw some managerial insights based on the findings.

KeywordDynamic Programming Inventory Quantity Flexibility Rolling Horizon Supply Contract
DOI10.1016/j.ejor.2008.02.043
URLView the original
Indexed BySCI ; SSCI
Language英语
WOS Research AreaBusiness & Economics ; Operations Research & Management Science
WOS SubjectManagement ; Operations Research & Management Science
WOS IDWOS:000263206800014
PublisherELSEVIER SCIENCE BV, PO BOX 211, 1000 AE AMSTERDAM, NETHERLANDS
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Citation statistics
Cited Times [WOS]:63   [WOS Record]     [Related Records in WOS]
Document TypeJournal article
CollectionDEPARTMENT OF ACCOUNTING AND INFORMATION MANAGEMENT
Affiliation1.Faculty of Business Administration,University of Macau,,Macao
2.Department of Industrial and Systems Engineering,Texas A and M University,,United States
First Author AffilicationFaculty of Business Administration
Recommended Citation
GB/T 7714
Lian,Zhaotong,Deshmukh,Abhijit. Analysis of supply contracts with quantity flexibility[J]. European Journal of Operational Research,2009,196(2):526-533.
APA Lian,Zhaotong,&Deshmukh,Abhijit.(2009).Analysis of supply contracts with quantity flexibility.European Journal of Operational Research,196(2),526-533.
MLA Lian,Zhaotong,et al."Analysis of supply contracts with quantity flexibility".European Journal of Operational Research 196.2(2009):526-533.
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